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Informist, Monday, Sep 2, 2024

By Anshul Choudhary

MUMBAI – Benchmark equity indices are expected to continue their winning streak on Tuesday as analysts don't see any negative trigger for markets. Some profit-booking by investors is expected owing to the sharp run-up in the past two weeks, but that is unlikely to discourage the bulls, who see the Nifty 50 touching 25500 points in the coming sessions.

"Monsoon has not faltered, and festive season will begin soon, which is expected to lead to better earnings growth," Alok C. Churiwala, managing director of Churiwala Securities, said. Expectations of lower interest rates in the US are also likely to keep sentiment positive till the US Federal Open Market Committee September meeting outcome later this month, he said.

However, the 13-session winning streak of the Nifty 50, which saw the index end at its lifetime closing high of 25278.70 points today has raised some alarm bells. "It is a good opportunity to book profits in stocks where valuations have run up ahead of fundamentals," Churiwala said. The Nifty 50 has risen 4.7% in the last 13 sessions. 

Profit booking is largely expected in the mid-cap and small-cap space, where analysts pointed to expensive valuations of public sector units and sectors such as defence. The broader market indices were down today and may fall further in the coming sessions, analysts said. Today, the Nifty Smallcap 250 was marginally lower and the Nifty Midcap 150 fell 0.3%.

For large-caps, the near-term outlook appears to be comparatively better and profit-booking at higher levels is expected to only slow down the pace of gains this week for the Nifty 50. The 50-stock index rose 1.7% during the previous week, and 1.3% the week before.

Technical analysts expect the Nifty 50 to find support at 25000-25100 points if it falls once investors start booking profits. "This rise cannot go on for eternity and it will turn...but timing is difficult to predict," Jatin Gedia, technical research analyst at Sharekhan, said.

While the risk of profit-booking remains, analysts continue to advise investors to buy on dips. This optimism stems from expectations of rate cuts in the US and India this year. "A Fed rate cut in September appears inevitable and the bond market is now pricing in about 100 bps by December. We think the RBI will follow suit, with a strong chance of front-ending in October or December," Emkay Global Financial Services said in a report today.

For the Fed's September meeting, the CME Fedwatch tool showed expectations are still skewed towards a 25-bps cut. It shows a nearly 70% probability of a 25-bps rate cut, the same as last week's expectation.

Two-wheeler companies are expected to rise more after a good show in August, while makers of passenger cars and commercial vehicles may decline due to a muted sales outlook. "For FY25E (2024-25), we expect growth trajectory to be led by the two-wheeler space with high base limiting growth in PV and CV categories," ICICI Direct Research said in a report.

Several automobile companies reported August sales data on Sunday and today, which led to stock-specific reactions in automobile companies. As expected, two-wheelers showed better growth numbers, with Bajaj Auto's two-wheeler sales volume rising 18% on year and those of TVS Motor up 14%. Within the passenger vehicle space, Mahindra & Mahindra outperformed its peers with growth of 16% in sales volumes of passenger cars. However, cars sold during the month declined on year for Tata Motors and Maruti Suzuki.

Information technology stocks are seen higher due to expectations of better earnings growth after interest rate cuts in the US. However, analysts said the gains may be capped in the near term owing to expensive valuations, but these have the ability to rise more once earnings start improving, they said. Today, IT stocks were mixed, with HCL Technologies rising over 3% and Infosys gaining 1.1%, while Wipro and Tata Consultancy Services declined nearly 1% each.  End

Edited by Avishek Dutta

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